In the last year, there has been a real stagnation in Swiss investment banking. Now, firms such as Swisscom or Sunrise are in the headlines with their planned deals. Reinout Boettcher, head of investment banking in Switzerland at foreign bank J.P. Morgan, talks to finews.com about the stop-and-go in his field.

Mr. Boettcher, telecommunications group Sunrise is to spin off and be relisted on the Swiss exchange, Swisscom is planning an acquisition in Italy: after last year’s lull, investment banking clearly seems to have a new lease of life. What’s behind this?

The market environment is certainly looking very promising. There are various different drivers behind the dynamics. On the business side, these are the search for growth opportunities, scaling and synergy effects, and strategic portfolio additions.

These include new technologies, for instance, or the opening up of new geographic markets and target groups via acquisitions.

Are there other factors as well?

We are also seeing a sustained trend of focusing on core business, along with a withdrawal from business segments which sit outside of central activities.

«The list of top-tier IPO candidates in Switzerland is also long»

Another key factor, however, is private equity, no matter whether you are buying or selling. There is sometimes a great deal of pressure to sell when it comes to long-term investments. When you have dry powder in the trillion dollar range, there is also a great deal of pressure to invest, which causes increased activities.

Will 2024 go down in history as a record year for mergers and acquisitions?

We’re still only in the first quarter. It’s still difficult to say how strong the year will be when it comes to transactions in Switzerland. All in all, however, it should be considerably better than 2023.

The consistently strong M&A pipeline is also a confirmation of this. We are observing a significant increase in the number of such plans, not only in Switzerland, but also in Europe and around the world.

This year, Swiss exchange operator SIX is expecting up to 15 new listings. Has a long pipeline been building up in terms of business with equity capital market transactions?

The impressive rally in the secondary markets has created a significantly more favorable environment for capital market transactions and initial public offerings.

Given the prevalent uncertainty over the last two years, there have only been very few IPOs on the market, but the pipeline has been further expanded across all of Europe. The list of top-tier IPO candidates in Switzerland is also long.

And are these candidates pushing for the start?

In light of the more positive environment, issuers are beginning preparations for floatation on the market, although there is normally a period of twelve to 24 months from the start of internal preparations until the stock market listing.

«Good acquisitions can be well financed today»

We expect that the IPO activity will increase gradually over the course of 2024 and reach a normalized level in 2025.

The capital market business in the bonds segment is also ramping up currently. Since the start of the year, more than 160 billion euros of investment-grade bonds have already been issued by over 30 companies in the euromarket, including two Swiss heavyweights, ABB and Nestlé, with a total issue volume of 2.75 billion euros. Can things carry on at this pace?

At the moment, in the context of cooling inflation and uncertain financial prospects, the market is praising significant interest rate steps by the central banks, which has led to considerably improved conditions in the bonds market.

The development over the course of the year will now heavily depend on the further economic development and on how the central banks react.

Will the foreign capital raised flow into growth and then back into acquisitions?

With regard to the transaction business, the financial markets are quite a bit more constructive compared to the past year, even if they are more expensive. Good acquisitions can be well financed today.

Since the Covid crisis broke out, global investment banking has stopped and started, there have been many ebbs and flows. When can the sector leave these extremes behind?

We can’t look at investment banking without also looking at the framework conditions. For years, we have seen high volumes in the M&A market, fueled by low interest rates and affordable capital – a development which finally had its high point in the record year 2021.

«I wouldn’t talk about extremes»

The volumes decreased significantly in 2022 and in 2023, owing to various different challenges, whether these were supply chain bottlenecks, increasing energy costs, aggravated inflation and rising interest rates in the performance, or uncertain financial prospects.

For 2024, we now anticipate a recovery. This is why I wouldn’t want talk about extremes; instead, about processes to allow us to adapt to the changing framework conditions.

The same can be said in Switzerland: the investment banking of UBS is occupied with the integration of Credit Suisse and can’t take over the new subsidiary’s book of corporate clients just as it is. Will this open a one-time window in 2024 for competitors such as J.P. Morgan?

The market situation is certainly something special just now, many things are still falling into place. Nevertheless, not much will change for us as a global leading bank in investment banking.

Reinout Boettcher is head of Switzerland and Swiss investment banking at J.P. Morgan, America’s biggest bank. In Swiss investment banking, the bank is one of the leading providers, alongside local players such as UBS or the forcibly sold Credit Suisse (CS).